UPDATE 3-Macy's cuts forecast ahead of holiday season after gloomy quarter

Uday Sampath Kumar and Melissa Fares

(Adds details from call, analyst quote, bylines, PIX available; updates share price)

Nov 21 (Reuters) - Macy's Inc cut its annual profit forecast for the second time this year on Thursday, as the department store operator blamed weak international tourism and sluggish mall traffic for the first drop in same-store sales in two years.

Shares fell 4% in premarket trading. The company was the second major department store to cut its earnings outlook this week, after Kohl's Corp, ahead of the holiday sales season.

Department stores and apparel retailers are grappling with a shift toward more shopping at big-box retailers like Target Corp and Walmart Inc, as well as at online giant Amazon.com Inc.

Target on Wednesday posted another set of strong sales numbers and raised its full-year forecast, driven by demand for its apparel.

Comparable sales at Macy's owned and licensed stores fell 3.5% in the third quarter ended Nov. 2, also due to prolonged warm weather that hit demand for winter goods. Analysts had expected a 1% decrease, according to IBES data from Refinitiv.

"The sales deceleration was steeper than we expected," Chief Executive Jeff Gennette said in a statement.

A drop in international tourists, some of Macy's biggest spenders, is also pressuring sales. The 161-year-old, Cincinnati-based retailer also experienced some issues with its website "in preparation for the fourth quarter."

Gennette tried to reassure investors of Macy's preparations for the all-important holiday season, which kicks off next week.

However, analysts remained skeptical.

"We expect a very competitive and difficult holiday quarter for the department store segment," largely due to steep promotions and discounts to drive traffic into stores and to digital, said research firm Retail Metrics founder Ken Perkins.

Many of the top gift ideas are electronic gadgets which Macy's does not sell, Perkins said.

"Macys needs to differentiate itself in terms of gift selection in order to drive interest and traffic. It needs to expand items for same-day delivery and execute on this."

The largest U.S. department store operator, which has closed more than 100 stores since 2015 and cut thousands of jobs as mall traffic plummeted, has completed a revamp of about 150 stores with fresh interiors and better assortment of merchandise, and expanded its off-price "Backstage" departments into more stores, he said.

It has also upgraded its website and worked hard at clearing excess inventory, he added.

Mattresses, fragrances, dresses, and fine jewelry performed well during the reported quarter, the retailer said, while men's and women's sportswear, handbags, housewares, and furniture performed poorly.

Macy's now expects 2019 adjusted profit of between $2.57 per share and $2.77 per share, compared with its previous forecast of between $2.85 and $3.05.

It also projected full-year total comparable sales to fall between 1% and 1.5%, compared to a previous forecast of up to a 1% rise.

Adjusted net income attributable to Macy's shareholders fell to $21 million, or 7 cents per share, in the quarter, from $83 million, or 27 cents per share, a year earlier.

Analysts had expected the company to break-even on a per share basis.

(Reporting by Uday Sampath in Bengaluru and Melissa Fares in New York; Editing by Sriraj Kalluvila and Nick Zieminski)